The implementation of merchant discount rates (MDR) on select Unified Payments Interface (UPI) transactions will be deferred until after Diwali, the National Payments Corporation of India (NPCI) said on Tuesday.
The UPI and Services Steering Committee took the decision on Oct. 13, keeping the festive season in mind. The revised rates will take effect immediately after Diwali, on a date to be notified separately, according to an NPCI statement.
The decision delays the planned Oct. 15 rollout of charges on certain merchant transactions, giving businesses and payment service providers more time before the revised framework comes into effect.
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Which UPI Transactions Will Attract MDR?
Under the revised framework, select merchant categories, including railways, telecom services, insurance and fuel, will attract a flat MDR of Rs 5 on UPI transactions above Rs 2,000.
For large merchant payments above Rs 2,000, a charge of 0.4% will apply, capped at Rs 300, according to the earlier framework outlined by NPCI.
The revised structure will affect only a small share of UPI transactions. Around 4% of merchant transactions are expected to fall within the framework, while more than 95% of person-to-merchant (P2M) transactions will remain outside it.
Small merchants operating under the person-to-person merchant (P2PM) model will continue to pay zero MDR.
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What The MDR Changes Mean For UPI Users
Individual users will not face a monthly quota or cap on free UPI transactions. Payments within the applicable free framework will continue without an MDR charge.
Banks have also been advised to ensure that merchants do not pass MDR costs on to customers. Consumers are therefore not expected to face an additional charge for UPI payments under the revised framework.
The new structure will also set aside 5% of total MDR collections for a dedicated fund to support UPI acceptance among small merchants.
MDR revenue will be shared among participants across the UPI ecosystem and is expected to support the expansion of the payment system, cybersecurity and innovation. The revised rates are also expected to remain lower than charges applicable to cards and digital wallets.
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